'Observation' rule again on Courtney's radar screen

Just about every day in the emergency department at Lawrence + Memorial Hospital in New London, Dr. L. Anthony Cirillo and other physicians see elderly patients who are obviously sick and need to stay in the hospital for a few days to sort out the cause of their chest pains, abdominal ailments or other symptoms.

Problem is, without a definite diagnosis - the kind a subsequent series of tests and monitoring would provide - the patient must be classified under "observation status" instead of as an "inpatient" for purposes of Medicare coverage, or hospitals risk stiff penalties from Medicare auditors.

It's a distinction, patient advocates say, that means virtually nothing in terms of the level of care, but can make all the difference to patients and their families after they leave the hospital and need to be in a nursing home or with skilled nursing care at home.

"This is clearly a rule that gets in the way of doing the right thing," said Cirillo, who is director of health policy and legislative advocacy for Emergency Medicine Physicians, the group whose doctors staff the emergency departments at L+M, the Pequot Health Center in Groton and The Westerly Hospital. "It penalizes patients and hospitals. It makes no sense."

Under current Medicare rules, "observation status" patients aren't covered for follow-up skilled nursing care, forcing them to pay as much as $10,000 to $15,000 a month out of pocket for nursing home care, or putting themselves at risk by forgoing the needed services, said Terry Berthelot.

Berthelot is an attorney for the Center for Medicare Advocacy, which brought a class-action lawsuit against Medicare on behalf of Medicare patients, including a Connecticut resident who is the lead plaintiff. Only Medicare patients hospitalized for three days or more as an "inpatient" can have those services covered.

The lawsuit, brought in 2010, is pending in federal district court in Hartford.

"We want observation stays to go away entirely," Berthelot said. "These patients are getting an inpatient level of care. When these people forgo needed care at a skilled nursing facility, chances are they'll fall or have to be rehospitalized, or if they do get the care, they end up with enormous debt."

Typically, noted Judith Stein, founder and executive director of the Willimantic-based advocacy center, low- and moderate-income senior citizens suffer the most harm from the rule because they're the least likely to have supplemental health insurance to their Medicare coverage.

She also noted that "observation status" patients have no appeal rights under Medicare, unlike those with "inpatient" status who want to challenge denial of coverage.

"Sometimes these patients end up having to liquidate their life savings," Stein said.

After several years of working to fix the problem, Berthelot and Stein are more hopeful than ever that a legislative remedy is on the horizon. U.S. Rep. Joe Courtney, D-2nd District, introduced a bill this summer that would require Medicare to cover nursing home care or home care after a three-day hospitalization, regardless of whether the patient was categorized as an "inpatient" or "observation."

The bill, Courtney's third attempt at a congressional remedy, has broader backing than the previous two tries, with 94 representatives - 74 Democrats and 20 Republicans - along with 40 health care and advocacy groups signing on as supporters, Courtney said. A companion bill in the Senate is also gaining support, he added.

"We couldn't get anybody to pay attention to this in the past," Courtney said Friday. "But as the numbers of people affected increases, there's been increasing support from stakeholders and members of Congress."

The case that brought the issue to his attention, he recalled, involved a Norwich resident in his 80s who fell in his apartment and was hospitalized for five days. Afterward, he needed rehabilitation but wasn't covered for the services.

Hospitals, Courtney said, are in a bind, too, because of the steep penalties imposed if Medicare auditors determine after the fact that an "inpatient" hospitalization should have been classified as "observation."

"Hospitals are getting very gun-shy about audits and are erring on the side of observation status," Courtney said.

Colleen Sullivan, director of care management at The William W. Backus Hospital in Norwich, said Backus and other hospitals "live in fear" of Medicare audits. "We're under intense scrutiny," she said.

The hospital, Sullivan said, strongly supports Courtney's bill. It would retain the "observation status" category, but not the penalty for patients that goes along with it.

"The purpose of observation is so that physicians can figure out what's wrong with a patient and provide treatment," she said. "Sometimes you need to do that in a safe and supportive environment."

At L+M, Wanda Carlson, director of case management, and Donna Schneider, chief compliance officer, said patients are informed when they're admitted under "observation status." But the implications are difficult for many patients to understand, particularly when they're ill.

"It's very confusing," Carlson said. "As the population ages, this is becoming more and more of an issue. When it happens, it's very significant for patients and their families."

L+M spokesman Mike O'Farrell said the hospital hopes Courtney's bill succeeds. "We strongly support Rep. Courtney's bill and (are) appreciative of his leadership on this vexing issue," he said.